Ad Fraud Is The New School Mafia

It's no big news that ad fraud is rampant. Forrester estimated a "nominal dollar wastage" in 2016 of $7.4 billion on desktop/laptop in the United States alone.

But, while everyone is busy talking about verifications and certifications not enough attention is given to the perpetrators. As long as organized crime continues to pursue ad fraud, it will take stronger measures and deeper pockets to stop it.

Follow the Money, Find the Criminals

Ad fraud is literally a gold mine for fraudsters because the return on investment is huge. The cost of running millions of bots is pennies compared to the millions they can make by generating and charging for false traffic.

Hewlett Packard's The Business of Hacking deemed ad fraud to have the highest returns compared with extortion and other cybercrimes. Fraud expert Augustine Fou claims that ad fraud is more lucrative than tax fraud, counterfeiting goods or being a Somali pirate.

In addition, ad fraud is a more effective means of money laundering compared with more traditional schemes such as human cash smuggling, casinos, insurance policies and securities. All of the earnings from other criminal activities can pass through the digital marketing channels and boost profits at the same time. Due to the fact that ad fraud is international it's also easier to transfer money across borders.

Last year, a group based in Russia operating out of data centres in the US and Netherlands, created a "bot farm" generating $3 to $5 million per day by targeting premium video advertising slots. In June, 2015 a group of Estonian criminals were found guilty of infecting 4 million computers in 100 countries to generate $14 million by hijacking users to different websites and stealing ad commissions.

The World Federation of Advertisers estimates that within the next decade, fraudulent Internet traffic schemes will become the second-largest market for criminal organizations. In fact, a major Ukrainian crime ring is rumored to have switched from bank phishing scams to online ad fraud, given the fact that it is so lucrative - and others are likely to follow.

With Ad Fraud there is No Smoking Gun

Besides the huge opportunity, criminals can feel secure they won't get caught. There isn't consensus around legal digital advertising procedures that can be enforced. It's not clear what constitutes a crime, how it should be measured, and the acceptable punitive measures.

Law enforcement officials don't have the technology, training, or expertise to tackle ad fraud. Until recently, it wasn't considered a major threat and there was only limited awareness of the financial impact.

Then there is the difficulty solving the crime itself, where the identity of the fraudster is often hidden due to all the players in the ad fraud ecosystem that are involved with each ad placement including media agencies, demand side platforms, exchanges, ad networks, and supply side platforms.

Even if they are caught, fraudsters can recover quickly. For example, fraudsters can create web sites and then deploy bots to create fake eyeballs and ad interactions. It may take time for the sites to be flagged as suspicious, but even if they are caught, fraudsters can always close shop and create a new site in an instant. Creating bad traffic is fairly easy with few technical hurdles, which has created the reality that many are happy to look the other way.

Wherever there are huge profits to be made, criminals will flock. As long as organized crime rings are involved and have resources to invest, the volume and sophistication of scams will increase. Perhaps by targeting the big guys that are perpetrating most of the crimes, clarifying the nature of the crime, finding more realistic ways of enforcement, and creating punitive actions that might deter criminal activity, ad fraud can be reined in. Only then will tools and certifications have a fighting chance of making a single dent.

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